The charter school movement was supposed to transform American public education. So far, though, the results have been mixed. But HBS grads nationwide are offering new approaches, innovative methods, unique models—all of them begging the same question.

Photo by Corbis/Roy McMahon

When President Obama named Chicago schools chief Arne Duncan his secretary of education in 2008, there was great optimism in the charter school movement. Duncan, after all, had long welcomed charters—public schools operating outside the education bureaucracy—in Obama's hometown.

Obama's charter vision found traction in the 2009 American Recovery and Reinvestment Act, with a Race to the Top competition that promised more than $4 billion in stimulus money for states that—among other reforms—heeded the call to establish what the President referred to as "laboratories of innovation."

For charter school activists, it was a long time coming. Much of the movement's inspiration can be traced back to education reformers like free-market economist Milton Friedman, who argued as early as 1955 that education aid should follow students to the school of their choice, thereby forcing all schools to compete—and innovate—to retain their students. The first charter school law was passed in Minnesota in 1991; by 2011, there were 5,275 charters nationwide, making up more than 5 percent of all public schools.

In June 2009, however, the movement hit a bump. Stanford University's Center for Research on Education Outcomes issued the first major national study on the efficacy of charter schools, and the results were jarring: Just 17 percent of charter schools outperformed their traditional public-school peers, while 37 percent performed significantly worse. And while charter performance has improved in the last four years, a new Stanford study released in January that detailed those gains was prefaced by the authors' blunt assessment: "The research shows that to date, high-performing charter schools are in the minority."

So what will it take to make that minority a majority? "Charters have created avenues for the right people to do big things," says Greg Thompson (MBA 2005), CEO of the Tennessee Charter School Incubator, which provides managerial training and school launch support for charter school leaders. "Now we need systems to make sure high-quality people have the skill sets to get it right."

Thompson is one of many HBS alumni who've emerged as leaders in education reform at a time when charters have experienced rapid growth and decidedly mixed results. Together, they form a chorus: The charter school movement still has great promise. But it will take better management, new teaching methods, stricter oversight, and a push for innovation to fulfill that promise. Charter schools, in other words, might just need a better business plan.

School Ties

A loosely knit HBS charter network links alumni nationwide. Greg Thompson (MBA 2005) leads the Tennessee Charter School Incubator, which has worked with the Charter School Growth Fund, run by CEO Kevin Hall (MBA 1996), to raise a $30 million fund dedicated to starting and growing new charter organizations in Tennessee. One of the Growth Fund's grantees is Melissa Megliola-Zaikos (MBA 2000), founder and CEO of Intrinsic, a new charter management organization in Chicago. She developed Intrinsic's blended-learning model, with students learning online and in the classroom, while serving as one of the Fund's entrepreneurs-in-residence. In Boston, Unlocking Potential cofounder Scott Given (MBA 2010) found inspiration in the MBA elective Entrepreneurship in Education Reform, taught by HBS lecturer Stacey Childress (MBA 2000), who later served on Given's board. And Childress, now at the Bill & Melinda Gates Foundation—which invested heavily in Hall's Growth Fund—has provided funding for a charter run by Match Education CEO Stig Leschly (MBA 1997/JD 1998).

Smart Funding

While charter school educators are unburdened from much regulation, going it alone can often be a struggle. This is especially true in the early stages of school growth and replication. Hitting the ground running is crucial.

That's where Kevin Hall (MBA 1996), president and CEO of the Colorado-based Charter School Growth Fund (CSGF), comes in. Since 2005, the nonprofit Growth Fund has provided necessary capital to 34 charter management organizations (CMOs) that run networks of charters serving 125,000 students in 330 schools in underserved communities nationwide. It has also worked with Tennessee and Florida to create dedicated funds for high-performing charters. In Tennessee, CSGF partnered with the Tennessee Charter School Incubator, where fellow HBS alum Greg Thompson is preparing to launch 20 charter schools. Together, they raised $30 million—from Race to the Top grants and a variety of philanthropists, including the foundation started by the late John Walton—to establish a funding operation in Tennessee.

The Fund supports CMOs whose schools have performed well on a broad range of metrics, including statewide tests, college admittance rates, and college completion. The setup, Hall explains, is much like a venture capital fund. "We basically seek the highest-performing charter school organizations, and give them philanthropic funds to help them build a long-term sustainable model," he says. CSGF has seen a strong return on investment so far: The 2013 Stanford study that showed a wide disparity in learning gains among CMOs in 23 states found that those organizations backed by Hall's fund had significantly higher learning gains than other CMOs or independent charter schools.

"We are trying to build the capital market to help high-performing charters grow," says Hall, who expects to commit up to $250 million over the next five years to create about 500 new charter schools. The Fund typically targets operators that run one or two successful charter schools and want to scale up to eight or more schools. "There are more people seeing the possibility of investing philanthropy in the creation of high-performing schools, which they have been able to replicate with high degrees of fidelity."

Cutting Losses

Unfettered by oversight from a local school board, most charters are authorized by state boards of education, universities, and, in some cases, agencies within school districts themselves. These authorizers sign charters to a contract—usually between 5 and 15 years—with specific targets for academic performance promised. But critics say the groups have failed to weed out the low-performing charters.

In Washington, DC, Scott Pearson (MPA/MBA 1991), executive director of the DC Public Charter School Board (PCSB), practices a nationally renowned model of school account-ability. Pearson oversees a $600 million budget for 57 charter operators that serve almost half of DC's public school students on 102 campuses. A seven-member volunteer board votes on his staff's recommendations to approve new schools, let current charters expand, or close those plagued by low performance or financial mismanagement. "We give them many years of warnings, and we publish a report every year that shows charter performance," says Pearson, who served in the US Department of Education's charter school division before joining PCSB in 2012. "If we find that they consistently miss their goals, and have only 20 percent proficiency year in and year out, we'll let them operate to the end of the year and then close them down."

This academic year, PCSB approved four schools, and one school with a history of poor academic performance gave up its charter. Since the charters were authorized in the 1990s, 26 have closed, representing a 33 percent closure rate. It's a necessary check on taxpayers' dollars, says Pearson: Charters were founded with the promise of autonomy for entrepreneurial educators in exchange for accountability; closing low-performing charters delivers on that promise.

Teaching the Teachers

Just as the early charter founders took aim at fixing what's wrong with traditional schools, the new charter generation wants to reform how teachers get trained to teach in their schools.

At Match Education in Boston, CEO Stig Leschly (MBA 1997/JD 1998)—a former HBS lecturer who taught the MBA elective Entrepreneurship in Education Reform—leads an organization that runs charters that use extensive one-on-one tutoring to make learning gains. Match schools with 250 students will typically include 20 teachers and 50 tutors, with students spending five hours a day in classes and two hours in small-group or individual tutoring.

In addition to operating charter schools, Match Education won permission from the state in 2012 to grant master's degrees in education. During the first year of the two-year program, prospective teachers work as tutors in Match classrooms, providing one-on-one or two-on-one attention. They also attend intensive training sessions on Friday and Saturday, which involve traditional coursework and classroom simulations. In their second year, the fledgling teachers have full-time teaching jobs elsewhere, and are granted their diplomas only if they complete their coursework and deliver classroom results. Master's candidates pay $4,000 in tuition when they've obtained the degree. Employers, meanwhile, pay Match a finder's fee of $6,000 to get linked to the second-year teachers.

"Having revenue from the employers is a kind of accountability that's good for us," says Leschly. "And the program is success-based: The master's students pay us only after the second year, when they get their degrees."

Many charters—set up as independent organizations by education visionaries—failed when the management systems needed to maintain the enterprise never developed. Staffing turnover presented a problem, too, for such one-off operations.

April Crosse Allen (MBA 2004) faced these challenges as executive director of the Knowledge Is Power Program (KIPP) Dallas–Fort Worth, as she tried to shore up the structure of one of the nation's most successful charter management organizations, which was expanding its model there.

At KIPP—another network singled out by the 2013 Stanford study for positive learning gains—that meant recruiting strong management talent, building evaluation protocols for teachers and administrators, and developing systems to coordinate the multiple aspects of schools: teachers, parents, students, curricula, state and federal mandates, operations, and finance.

"There's a huge need for great management talent to partner with talented education leaders," Allen says. "These are operationally and fiscally complex organizations, with many moving parts. You want the academic leaders to focus on the academics."

CHANGE FROM WITHIN:Scott Given (MBA 2010) and Unlocking Potential's in-district charter model have yielded some dramatic results, including Boston's UP Academy recording the largest jump in student math scores in Massachusetts last year.

Photo by Webb Chappell

So what happens if high-performing charter schools become the norm? If Milton Friedman's original thesis is correct, competition would eventually force traditional public schools to innovate.

Scott Given's (MBA 2010) experience might offer a preview of what this could look like. When Given graduated from HBS in 2010, he already had a well-crafted strategic plan, a high-powered board of directors, and $1 million in venture capital with the goal of building a game-changing educational nonprofit. Instead of establishing stand-alone charters, Given wanted to bring the charter mentality inside school districts, importing new structures and idealism to traditional schools or building an emerging form of charter—within a school district, but with autonomy in operations and curricula. Essentially, he'd be "restarting" the schools, changing the administration but keeping the students in place. The City of Boston took him up on his idea, and granted waivers on budget authority, use of time, curricula, and certain union work rules.

Less than three years later, his Unlocking Potential (UP) group runs a charter in Boston and a middle school in Lawrence, Massachusetts, among the worst school districts in the state. Another Boston charter and middle school in Lawrence will open this fall. UP students wear uniforms, have longer school days, attend a Saturday math academy, and attack ample homework nightly.

In some cases, UP's results have been dramatic. One year after taking over the Boston middle school, it had the biggest improvement in English test scores among all middle schools in the city and the biggest uptick in math scores in the state. "We've had a strong start," says Given. "Our schools are high-performing schools, and for that I am proud."

Developing charters within a school district is a different path, says Given. Disruptive, even. But he's managed to get full support for the model from everyone from the mayor to the superintendent of schools—the kind of buy-in that comes from a realization that solving America's education issue might require radical innovation.